United States District Court, C.D. Illinois, Urbana Division
June 16, 2004.
CINCINNATI INSURANCE COMPANY, Plaintiff,
DAWES RIGGING & CRANE RENTAL, INC., & STEVE TOEDT, Defendants.
The opinion of the court was delivered by: MICHAEL McCUSKEY, District Judge
Steve Toedt suffered a serious physical injury in the course of
his employment, and he filed a lawsuit seeking to recover damages
from several companies he believed contributed to his unsafe
working environment. One of those companies, Dawes Rigging and
Crane Rental, Inc., looked to Cincinnati Insurance Company to
defend it in the negligence suit in state court. Cincinnati,
however, filed a complaint in this court seeking a declaratory
order that it has no duty to defend Dawes in the case filed by
Toedt. Both parties seek summary judgment on this issue, and for
the reasons discussed below, judgment is entered in favor of
In 1998, Dawes leased a crane to Kelly Construction, Inc. for
use at the A.E. Staley Manufacturing Company in Decatur,
Illinois. At some point, a Dawes mechanic determined that the
crane needed a new hydraulic holding valve that supported the
boom of the crane. According to his complaint, Toedt, as an
employee of Kelly, "was required to and was in fact assisting in the maintenance of the aforementioned crane under
the supervision of employees" of Dawes. Toedt's complaint in
state court alleges that Dawes acted negligently, through its
employees, in securing the boom of the crane, which resulted in
"severe painful and permanent injuries" when the boom fell on
Dawes believed that Kelly's insurance carrier would be
responsible for its defense in the Toedt action. Accordingly,
Dawes tendered its defense to Cincinnati, claiming that it was an
"additional insured" on Kelly's general liability insurance
policy. Cincinnati disagreed with Dawes's interpretation of the
Kelly insurance policies, and it brought the dispute to this
court for resolution.
1. Agreements between Dawes and Kelly
In memorializing the leasing of the crane, Dawes and Kelly
executed an Equipment Lease on April 17, 1998. Several sections
of that document are relevant to the issues before this court.
Portions of paragraphs two and four provide that Kelly is
responsible for insurance coverage for the machine and physical
damage, with Dawes named as an additional insured. Paragraph nine
requires Kelly to "at [its] own expense maintain the Equipment in
good working order and condition." And paragraph ten notes that
the contract is deemed to have been made in the state of
In addition to the written lease agreement, Dawes and Kelly
reached an understanding about maintenance for the cranes. Kelly
paid Dawes a weekly fee to have a Dawes mechanic available in
Decatur to perform any needed equipment repairs or maintenance.
This agreement is unwritten, and the parties disagree as to the
precise contours of that agreement in terms of which company
controlled and directed the repair work.
2. Kelly's Insurance Policies Cincinnati attached to its motion for summary judgment copies
of the insurance policies it had issued to Kelly for the time
period during which Toedt's accident occurred. Kelly had procured
a Commercial General Liability policy, number 501 59 71, ("CGL
policy") and a Commercial Umbrella Liability policy, number 441
97 85 ("umbrella policy"). In response to those attachments,
Dawes claimed that Cincinnati has not provided "evidence
admissible under the Rules" that those are the policies at issue
in this case. In its own motion for summary judgment, however,
Dawes relied on the same policies, admitting "for purposes of
this motion" that Cincinnati's complaint alleged that these are
the relevant policies.
It is disingenuous for Dawes to object to the policies
Cincinnati attached to its motion for summary judgment without
raising any legal or factual argument to support its objection
and then to rely on the exact same documents in its own motion
for summary judgment. It does not appear, despite Dawes's empty
objection, that there is any material dispute at this time that
these are the relevant policies for this court to consider in
ruling on the motions for summary judgment.
The CGL policy contains GA 472 01 95, a page identified with a
handwritten number 19 and entitled "Automatic Additional Insured
Contractor." This document defines as an additional insured,
"[t]he person or organization shown in the Schedule but only with
respect to liability arising out of [Kelly's] ongoing operations
performed for that insured." The "SCHEDULE" portion of the
document lists "[a]ny person or organization for whom [Kelly is]
required in a written contract, oral agreement or oral contract
where there is a certificate of insurance showing that person as
an ADDITIONAL INSURED under this policy."
3. Pending Motions
Both parties seek summary judgment on the issue of whether
Cincinnati has a duty to defend Dawes in the Toedt proceeding. Cincinnati filed its motion
(#74), along with a memorandum of law (#75), and exhibits (#76).
Dawes responded (#82), and Cincinnati filed a reply (#87). Dawes
submitted its own motion for summary judgment (#78) and a
memorandum of law in support (#79). Cincinnati filed a response
(#83), and Dawes tendered a reply memorandum (#85).
Summary judgment is proper if "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed.R.Civ.P. 56(c); see
also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
In evaluating a summary judgment motion, the court focuses on
whether any material dispute of fact exists that would require a
trial. Winter v. Minn. Mut. Life Ins. Co., 199 F.3d 399, 408
(7th Cir. 1999). In making this determination, the court
construes all facts and draws all reasonable inferences in favor
of the nonmoving party. King v. Preferred Technical Group,
166 F.3d 887, 890 (7th Cir. 1999). Because the purpose of summary
judgment is to isolate and dispose of factually unsupported
claims, however, the nonmoving party must respond to the motion
with evidence setting forth specific facts showing that there is
a genuine issue for trial. Michael v. St. Joseph County,
259 F.3d 842, 845 (7th Cir. 2001).
1. Choice of Law
The first issue this court must address is choice of law. Dawes
raises the issue in its motion for summary judgment, and although
it is unclear how, if at all, the outcome of this case depends on
choice-of-law analysis, this court will nonetheless address the
issue. The insurance policies are the subject of the dispute
before this court, and they are the starting points for choice-of-law analysis. Neither party has identified a
choice-of-law provision in the insurance policies at issue, and
so Illinois' choice-of-law rules govern which state's substantive
law controls. Diamond State Ins. Co. v. Chester-Jensen Co.
Inc., 611 N.E.2d 1083, 1093 (Ill.App. Ct. 1993). Illinois
employs the "most significant contacts" test, which provides that
insurance policies are governed by "the location of the subject
matter, the place of delivery of the contract, the domicile of
the insured or of the insurer, the place of the last act to give
rise to a valid contract, the place of performance, or other
place bearing a rational relationship to the general contract."
Westchester Fire Ins. Co. v. G. Heileman Brewing Co., Inc.,
747 N.E.2d 955, 961 (Ill.App. Ct. 2001).
Of the factors identified by the Illinois courts, the location
of the insured risk is given "special emphasis." Jupiter
Aluminum Corp. v. Home Ins. Co., 225 F.3d 868, 873 (7th Cir.
2000). In this case, the insured risks identified in the policy
are all located in Illinois. Moreover, Kelly, the primary insured
and the party with whom the contract was formed, is domiciled in
Illinois. The events giving rise to Dawes's insurance claim also
occurred in Illinois.
Dawes maintains that because it is domiciled in Wisconsin, this
court should look to Wisconsin law in deciding Cincinnati's duty
to defend. Given the posture of this case, however, with the
primary dispute being whether Dawes is an insured, Dawes's
domicile or where Dawes received a copy of the insurance policy
is not relevant. Accordingly, Illinois law will govern the
2. Duty to Defend
The question of whether Cincinnati has a duty to defend Dawes
in the Toedt action can only be resolved by comparing the
allegations in Toedt's complaint with the insurance policy
Cincinnati issued to Kelly. Lapham-Hickey Steel Corp. v.
Protection Mut. Ins. Co., 655 N.E.2d 842, 847 (Ill. 1995). If it is clear from the face of the
complaint that the allegations do not state facts that fall
within the policy's coverage, then Cincinnati will have no duty
to defend Dawes in that action. Conn. Indemnity Co. v. Der
Travel Serv., Inc., 328 F.3d 347, 349 (7th Cir. 2003).
In evaluating the insurance policy, this court must consider
the policy as a whole, including the factual context of the
agreement. Ind. Ins. Co. v. PANA Cmty. Unit. Sch. Dist. Number
8, 314 F.3d 895, 901, 903 (7th Cir. 2002). Unambiguous terms
will be interpreted using their plain ordinary meaning and will
be given effect as written. First Ins. Funding Corp. v. Fed.
Ins. Co., 284 F.3d 799, 804 (7th Cir. 2002). A term will be
deemed ambiguous if it is susceptible to more than one reasonable
interpretation, and any ambiguities will be construed against the
insurer who drafted the agreement. Commonwealth Ins. Co. v.
Stone Container Corp., 351 F.3d 774, 777 (7th Cir. 2003). But
this court will refrain from creating ambiguities in the
provisions of the insurance policies. First Ins., 284 F.3d at
In addition to the guidance for interpreting the insurance
policy, well-settled doctrine mandates that the underlying
complaint be liberally construed in favor of the insured and that
any doubt arising during the comparison be resolved in favor of
the insured. Conn. Indemnity, 328 F.3d at 351.
3. The Additional Insured Endorsement
Dawes asserts that it is entitled to insurance coverage, and
therefore defense in the Toedt action, under GA 472 01 95, the
additional insured endorsement on the CGL policy. Dawes believes
that the allegations in the Toedt complaint fall within the scope
of the additional insured endorsement, which provides coverage
"only with respect to liability arising out of [Kelly's] ongoing
operations performed for [Dawes]."
Cincinnati argues that endorsements like the one included in
Kelly's insurance policy provide coverage for imputed liability only. In other words,
Cincinnati believes that Dawes, as an additional insured, is not
covered for its own acts of negligence but would be covered for
liability caused by Kelly and imputed to Dawes. In support of
this argument, Cincinnati cites to several Illinois Appellate
Court decisions: American Country Insurance Co. v. James McHugh
Construction Co., 801 N.E.2d 1031 (Ill.App. Ct. 2003);
National Union Fire Insurance Co. v. R. Olson Construction
Contractors, Inc., 769 N.E.2d 977 (Ill.App. Ct. 2002); and
American Country Insurance Co. v. Cline, 722 N.E.2d 755 (Ill.
App. Ct. 1999). All three of these cases hold that the insurance
company had no duty to defend because the underlying complaint
did not allege negligence against the named insured, but only
alleged negligence on the part of the additional insured.
The additional insured endorsement being analyzed in each case,
however, was significantly different than the one at issue here.
Specifically, the McHugh court reviewed an endorsement that
covered only "acts or omissions in connection with [the named
insured's work] for that additional insured" and specifically
excluded from coverage injury "arising out of any act or omission
of the additional insured(s) or any of their employees."
McHugh, 801 N.E.2d at 1034. The endorsement in Olson again
explicitly provided that "coverage shall not apply to any
liability resulting from the certificate holder's own negligence
or the negligence of its servants, agents, or employees."
Olson, 769 N.E.2d at 979. And the Cline court analyzed an
endorsement providing coverage "limited to liability specifically
resulting from the conduct of the Named insured which may be
imputed to the Additional Insured." Cline, 722 N.E.2d at 758.
Moreover, that endorsement also specified that the policy does
not cover "liability arising out of the claimed negligence of the
Additional Insured." Id. The material differences in the
policies preclude this court from relying on those opinions to
hold that the additional insured endorsement in this case provides coverage only for imputed liability. Nothing in the
language of the endorsement supports that limitation on coverage.
Cincinnati also maintains that the allegations in the Toedt
complaint do not fall within the scope of the additional insured
endorsement because Toedt's injury did not "aris[e] out of
[Kelly's] ongoing operations performed for [Dawes]." Cincinnati
claims that, per the agreement between Dawes and Kelly, Dawes was
performing requested maintenance on the crane. The Dawes mechanic
was coordinating the repair and was in control of the repair
procedures. None of the Kelly mechanics, Cincinnati asserts, were
qualified the perform such repairs and could only assist under
the direction of the Dawes mechanic. Given these facts,
Cincinnati contends, Toedt's injury did not arise out of any
operation that Kelly was performing for Dawes, but rather out of
work Dawes was performing for Kelly.
In response, Dawes focuses first on the phrase "arising out of"
and argues that it is a broad term and can be satisfied by a mere
causal connection without the requirement of proximate cause. But
for his employment with Kelly, Dawes asserts, Toedt would not
have been injured. This court agrees, see Maryland Casualty
Co. v. Chicago & North Western Transportation, Co.,
466 N.E.2d 1091, 1094-95 (Ill.App. Ct. 1984), but the endorsement uses the
"arising out of" language with respect to operations Kelly is
performing for Dawes. The simple connection of Toedt's employment
with Kelly does not appear to satisfy that clause in the
Dawes next restates language in the Toedt complaint that Toedt
"was required to and was in fact assisting" the Dawes mechanic in
the repair work. The notion that Toedt was required to assist the
Dawes mechanic would seem to indicate that Kelly was performing
some operation for Dawes at the very least providing assistance
with repairs. Although Cincinnati argues that Dawes was in charge of the maintenance work, even the crane
supervisor for Kelly averred in his affidavit that Kelly
employees would assist in repair operations at the request of
Dawes. That is consistent with the language in the complaint that
Toedt was "required to" help with the crane repair. And the
notion that Kelly assisted Dawes in repair work satisfies the
insurance policy's requirement that there be an ongoing operation
that Kelly was performing for Dawes here, assistance with
Liberally construing the "arising out of" language in the
insurance policy, relying on the plain language of the underlying
complaint, and resolving all doubts in favor of Dawes, this court
concludes that the factual allegations in the Toedt lawsuit fall
within the parameters of coverage as provided by the additional
This interpretation of the policy is consistent with that
discussed in Casualty Insurance Co. v. Northbrook Property &
Casualty Insurance Co., 501 N.E.2d 812 (Ill.App. Ct. 1986),
where the Illinois Appellate Court held that an insurance company
had a duty to defend under an endorsement that provided coverage
for "liability arising out of operations performed for the
additional insured by the named insured." Cas. Ins., 501 N.E.2d
at 813-15. The court found that, although the underlying
complaint did not allege negligence against the named insured,
the underlying plaintiff was injured while performing work for
the named insured, who was in turn performing operations for the
additional insured. Id. at 815. The additional insured was
therefore entitled to a defense based on the endorsement in the
insurance policy. So too, in this case, Dawes in entitled to a
defense from Cincinnati.
Cincinnati's next argument against a duty to defend is first
found in footnote two of its motion for summary judgment. That
footnote, which is tacked on to the end of the argument section
regarding the additional insured endorsement, reads: In addition, Dawes has failed to demonstrate the
existence of a certificate of insurance showing Dawes
as an additional insured for the policy period at
issue, i.e., the policy in force at the time of the
January 2001 Toedt Accident.
Cincinnati expounds on that argument in its response to Dawes's
motion for summary judgment, explaining that the additional
insured endorsement provides coverage to a party "for whom [Kelly
is] required in a written contract, oral agreement or oral
contract where there is a certificate of insurance showing that
person as an ADDITIONAL INSURED under this policy." Cincinnati
asserts that Dawes can produce no such certificate and is
therefore not covered.
Dawes first argues that Cincinnati should be precluded under
the "mend the hold" doctrine from raising this argument given
that Cincinnati has consistently refused to defend based solely
on the interpretation of the clause discussing ongoing
operations. Pursuant to Illinois common law, the "mend the hold"
doctrine limits the rights of parties to contract disputes to
change their position throughout the lawsuit. Houben v. Telular
Corp., 309 F.3d 1028, 1036 (7th Cir. 2002); Harbor Ins. Co. v.
Cont'l Bank Corp., 922 F.2d 357, 362-365 (7th Cir. 1990). Dawes
suggests that it is unfair to allow Cincinnati, at this late
date, to change its grounds for refusing to defend Dawes. Given
that this argument merited only a footnote in Cincinnati's own
motion for summary judgment, this court is inclined to agree that
Cincinnati added this as an afterthought, completely separate and
apart from its original reasons for declining to defend Dawes.
In addition to its mend-the-hold argument, Dawes suggests that,
based on the punctuation in the endorsement, the certificate is
only necessary if the agreement is oral and not written. The
comma after "written contract" seems to separate that type of
agreement from the next two mentioned "oral agreement or oral
contract" and there is no comma separating the oral agreement
and contract from the clause requiring the certificate.
Construing this drafting liberally in favor of the insured, this court agrees with Dawes
that a certificate is not needed because Dawes and Kelly had a
written contract the Equipment Lease requiring insurance.
IT IS THEREFORE ORDERED:
(1) Cincinnati's Motion for Summary Judgment (#74) is
(2) Dawes's Motion for Summary Judgment (#78) is
GRANTED. Judgment is entered in favor of Dawes and
against Cincinnati regarding the duty to defend in
the Toedt action.
(3) This case is terminated.
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